How does trading in a vehicle save on sales tax?
Sample Transaction Assumptions:
Your Vehicle Market Value=$32,000
Your Vehicle Trade-in Value=$30,000
New Vehicle Purchase price= $40,000
Sales Tax Rate of 7%
Scenario #1 Sell Vehicle yourself: At first glance, selling your vehicle at market value appears to gain you $2,000 over trading in your vehicle. However, doing this requires you to pay 7% sales tax on the FULL purchase price of your new vehicle (Sales Tax=7%x$40,000=$2,800).
Scenario #2 Trade-in your vehicle: When you trade one vehicle for another you are only required to pay sales tax on the difference in price of the two vehicles. In this example our customer would only have tax liabilty on 7% of the difference in price or (Sales Tax=7%x$10,000=$700.) This results in a net gain of $100 compared to selling the vehicle yourself.
Summary
Understanding the above example helps to illustrate the reasons why selling your vehicle yourself is often not the best idea. You also should factor in your marketing costs, time on market, detailing time/expenses, hassle of selling, along with your higher sales tax liability. When you Trade-in your vehicle, it is an instant transaction that eliminates the need for a fill-in vehicle until your new vehicle is located. You bring your old vehicle in and drive your new vehicle home. Trading is much less of a hassle and we pride ourselves in providing an enjoyable buying experience. We work all the calculations and details for you. Our clients enjoy our system because we provide the expertise and they sit back, relax, and enjoy the anticipation and excitement of receiving their new car at a great value. If you have any questions about trading in your vehicle or would like us to do a complementary transaction analysis to determine the best option for you, then please contact us.
Your Vehicle Market Value=$32,000
Your Vehicle Trade-in Value=$30,000
New Vehicle Purchase price= $40,000
Sales Tax Rate of 7%
Scenario #1 Sell Vehicle yourself: At first glance, selling your vehicle at market value appears to gain you $2,000 over trading in your vehicle. However, doing this requires you to pay 7% sales tax on the FULL purchase price of your new vehicle (Sales Tax=7%x$40,000=$2,800).
Scenario #2 Trade-in your vehicle: When you trade one vehicle for another you are only required to pay sales tax on the difference in price of the two vehicles. In this example our customer would only have tax liabilty on 7% of the difference in price or (Sales Tax=7%x$10,000=$700.) This results in a net gain of $100 compared to selling the vehicle yourself.
Summary
Understanding the above example helps to illustrate the reasons why selling your vehicle yourself is often not the best idea. You also should factor in your marketing costs, time on market, detailing time/expenses, hassle of selling, along with your higher sales tax liability. When you Trade-in your vehicle, it is an instant transaction that eliminates the need for a fill-in vehicle until your new vehicle is located. You bring your old vehicle in and drive your new vehicle home. Trading is much less of a hassle and we pride ourselves in providing an enjoyable buying experience. We work all the calculations and details for you. Our clients enjoy our system because we provide the expertise and they sit back, relax, and enjoy the anticipation and excitement of receiving their new car at a great value. If you have any questions about trading in your vehicle or would like us to do a complementary transaction analysis to determine the best option for you, then please contact us.
